As many as 43 million Americans could have their federal student-loan debt either reduced or forgiven entirely under a plan U.S. President Joe Biden announced last month. Following through on a 2020 campaign pledge, Biden is moving to cancel up to US$10,000 in debt for individuals earning less than $125,000 a year and couples earning less than $250,000. He says the policy will help “families who need it most—working and middle-class people hit especially hard during the pandemic,” and borrowers who received federal Pell Grants, typically given to low-income undergraduate students, will be eligible for an additional $10,000. Yet Biden’s plan, generally lauded by progressives, drew criticism from moderates in his party, including candidates running in swing states in this fall’s midterm elections. Ohio’s Democratic U.S. Senate nominee Tim Ryan said, “Waiving debt for those already on a trajectory to financial security sends the wrong message to millions of Ohioans without a degree working just as hard to make ends meet.” Meanwhile, Republicans and right-wing groups are not only opposed but going so far as to look for ways to challenge the policy’s legality. What does the Biden administration’s decision to move forward with the policy, despite these widespread reservations, indicate about the administration’s political priorities?
Ben Ritz directs the Center for Funding America’s Future at the Progressive Policy Institute, a center-left think tank based in Washington. In the months and weeks leading up to the announcement of broad student-loan forgiveness, Ritz urged the Biden administration against it. While it would give immediate benefits to some college-educated voters, notably a key Democratic Party constituency, it wouldn’t do anything, Ritz says, to address the underlying drivers of rising tuition costs. Meanwhile, it would risk further alienating the non–college-educated voters Democrats are struggling to attract. As Ritz sees it, the political rationale for the administration’s move is to mobilize young, student–debt-burdened Americans to vote in a midterm-election year that’s going to be challenging for the Democrats—which, to Ritz, is emblematic of the party’s struggle to extend its appeal beyond its existing electoral base. It also, he thinks, illustrates something important and less obvious about the administration’s approach to coalition politics: Where previous Democratic presidents, including Barack Obama and Bill Clinton, made tough choices about what to prioritize and who to disappoint—for the sake of building broader coalitions beyond their party—Biden’s tendency has been to try to give something to every significant constituency within his party. Two years into his term, it’s a question how sustainable this political pattern will be.
Graham Vyse: How does student-loan forgiveness relate to the Biden administration’s broader policy agenda?
Ben Ritz: Something this administration has been consistent about is its desire to give something to every part of the Democratic Party’s coalition. Where Barack Obama and other previous presidents set priorities—seeing themselves as having a limited amount of political capital and fiscal space to work with, or as needing to balance tradeoffs—the Biden administration has seemed to want to give everybody in their coalition what they were looking for. There’ve been voices on the left and in the center saying it would be better politics to do a few things well, as opposed to a bunch of things half-baked, yet the administration has persisted in its tendency.
Much of the agenda that the Biden administration frames as being about “cutting costs” for American families is really more about “covering costs.” Student-debt cancellation fits perfectly with this pattern. Rather than tackling the underlying drivers of skyrocketing tuition, Biden’s plan is simply to have taxpayers pay off the debts people take out to cover college. It’s very troubling, not least for progressives because this “covering costs” approach bloats the government in a way that’s corrosive to their agenda. The best way to show that the government can be trusted to do more is by doing a better job of what the government already does. That hasn’t been a priority under this administration—at least not as much of a priority as it was for Barack Obama’s or Bill Clinton’s.
Vyse: So, what was the political calculation here?
Ritz: College-educated Americans tend to be Democratic, especially in the age of Trump. They’re vocal on social media, work disproportionately as Democratic staffers, and play an outsized role in political debate within the party. This decision on student-loan forgiveness was a concession to them at the expense of people Democrats traditionally claim to champion.
College-educated Americans tend to be Democratic, especially in the age of Trump. They’re vocal on social media, work disproportionately as Democratic staffers, and play an outsized role in political debate within the party.
It’s true that student-loan debt is top of mind for some young voters. In general, polling shows young voters are more concerned about the economy and inflation than about student-debt cancelation, but there’s no question the issue is more of a priority for them than for the U.S. population as a whole. The hope is that, if you give these voters $10,000 months before the midterms—or, in some cases, more than $20,000—they’ll get excited, knock on doors for Democratic candidates, donate money to Democrats, and show up to vote. It’s a strategy to energize the Democratic base.
Vyse: Naturally, Biden and his administration aren’t talking about this decision as a crass political maneuver, and advocates make the case for the decision on its merits. After all, some beneficiaries will be Americans who took out loans but didn’t finish college and get high-paying jobs—people who aren’t part of an economic elite. The White House says “no high-income individual or high-income household—in the top 5% of incomes—will benefit from this action.” What’s the best case you’ve heard for this policy?
Ritz: The best case I’ve heard for this policy is that some Americans are burdened by student debt but lack the income their educations were supposed to provide, which would have allowed them to pay off their debt. I think there’s a very clear argument for some form of debt relief for some people—and a very clear need to rein in the out-of-control costs of an American college education—but there’s a difference between reining in that cost and just throwing more taxpayer money at the problem.
This policy is really three policies in one: The first is a straightforward cancelation of $10,000 of debt. The second is the cancellation of an additional $10,000 of undergraduate debt for borrowers who were Pell Grant recipients. [Pell Grants from the U.S. government are typically given to undergraduates “who display exceptional financial need,” and these grants don’t usually require to be repayment.] Lastly, there are changes to income-driven repayment plans going forward. The first part—the cancelation of $10,000 in debt—disproportionately benefits higher-income people and people who will have higher incomes over the course of their lives.
Vyse: You opposed broad student-debt cancelation long before the administration decided to move forward with it. Why?
Ritz: One of the main problems with this policy is that it’s not really targeted based on financial need. The administration says it is targeted, because relief is going to individuals who made less than $125,000 in 2020 or 2021—or couples that made less than $250,000—but a couple making nearly $250,000 a year has rather a high income to begin with, and many people made less money during the pandemic than they typically would have—for instance, a doctor who normally makes $300,000 but got his workload cut—so these people might be in a better financial situation overall than their 2020 income would indicate. Another issue is that people who’re still in medical school or law school—or are recent graduates—may have substantial debt right after graduation, but their degrees may significantly increase their earning potential over their lifetimes.
The hope is that, if you give these voters $10,000 months before the midterms—or, in some cases, more than $20,000—they’ll get excited, knock on doors for Democratic candidates, donate money to Democrats, and show up to vote. It’s a strategy to energize the Democratic base.
So they’ll make much more than the average person, yet they’re still getting this debt cancelation. That’s on top of tens of thousands of dollars in debt Biden effectively canceled for them by suspending the accrual of interest over the past couple of years—and of inflation reducing the burden of their outstanding loan balance.
As Adam Looney of the Brookings Institution has remarked, this policy doesn’t simply fail to address the underlying drivers of college-tuition inflation. It’ll also make things worse: If the U.S. government is planning to cancel more of people’s debt going forward, that discourages people from being cost-conscious as they look at colleges. More importantly, it discourages schools from feeling obliged to control their costs.
People who take out debt for undergraduate education in the future are going to have higher tuition costs as well as a higher interest rate on what they borrow to cover those costs, because the Federal Reserve is going to raise rates with higher inflation. At the same time, assuming everything goes as planned, they’ll only have to pay 5 percent of their discretionary income toward their debt for a certain number of years, after which their debt will be canceled. There will also be changes to how interest on debt accrues as they’re making those payments.
Vyse: Some polling from last month showed most Americans are supportive of Biden’s plan, and it’s especially popular with younger Americans, but other polls indicate concern about the policy’s inflationary effects—and suggest it hasn’t given the president a boost in support from young Americans. How do you understand the public reaction to the plan?
Ritz: Clearly there will be some people who will get their debt canceled and feel very positively about that. I wouldn’t be surprised if Biden got a temporary boost in support from young voters, though I’m not sure what the political benefit will be. It’s worth recalling, though, that Biden’s stimulus checks were overwhelmingly popular initially, but pretty soon there was a sense of, What have you done for me lately? The inflationary effects of the stimulus ended up being worse for Biden than the checks were beneficial.
It’s important to remember that the average American has no student debt. More than four out of five American adults have no student debt. Among the groups of voters that Democrats have struggled to appeal to—swing voters, white working-class voters—the median voter has no student debt. Democrats are at risk of alienating a big part of the country by imposing costs on them and giving a benefit to the Democratic base. That alienation could grow, despite any initial euphoria among debt cancelation’s beneficiaries.
If the U.S. government is planning to cancel more of people’s debt going forward, that discourages people from being cost-conscious as they look at colleges. More importantly, it discourages schools from feeling obliged to control their costs.
Vyse: How do you see debt cancelation shaping U.S. politics more broadly, especially as the Republican Party is increasingly portraying itself as a multi-racial party of the working class?
Ritz: It’s not going to help make Democrats a more working-class party. It’s not helping to find non-college pathways for Americans to get good jobs. It’s a one-time payout, aside from the changes to income-driven repayment. As tuition costs keep rising, this policy isn’t going to be good for Democrats’ support with college-educated Americans, and non-college-educated people are going to be increasingly resentful of the party’s focus on people who go to college.
Vyse: Republican state attorneys general and conservative groups are exploring legal options to thwart this policy. What options do they see themselves having, and what do you think could come of their efforts, realistically?
Ritz: The biggest issue seems to be legal standing. Who has the standing to go before a court and say they were personally harmed by the government’s decision to cancel debt and describe how the courts should make things right? If they find standing, there’s a good case the court will find that Biden doesn’t have the authority to do this.
When Congress created the student-loan program, its intention was for borrowers to pay these loans back unless something made it impossible for them to do so. In the Heroes Act, which is what Biden claims gives him this authority, there was a provision to allow the president to cancel the debt of people directly affected by the terrorist attacks of September 11, 2001. The intention of that act was clearly not to give the president the unilateral authority to cancel over a trillion dollars of debt.
The worst-case scenario for borrowers would be that the courts reverse the debt-cancelation policy. Another possibility is that people have to repay their loans, which would be politically catastrophic for Biden and the Democrats. Yet another possibility is that the loan cancelation begins, but the courts stop the program before it’s all done, so some people get the cancelation and others don’t. There’s a lot of peril here.
Vyse: What does this all tell you about the Democratic Party's prospects of developing a viable alternative to Republican populism?
Ritz: Part of the electorate will vote for the party because it’s in favor of democracy and liberalism, but I’m concerned about Democrats thinking the only way to beat Trumpism is to pay people enough to vote against it. I don’t see that approach creating a durable coalition, especially if the financial spigot shuts off. Besides, every dollar spent on student-debt cancelation or stimulus checks has to be paid for somehow, whether through inflation, future higher taxes, or future spending cuts. Not considering those tradeoffs will likely harm Democrats politically—and hurt the very people they’re trying to help.